Government Budget's Effect on the Healthcare System

Government Budget’s Effect on the Healthcare System

Nietra J. Humphrey

HCS 440

June 19, 2013

Saeeda Hasaan

Government Budget’s Effect on the Healthcare System

Although the Affordable Care Act (ACA) will significantly reduce Medicare spending over the next decade health costs remain a major challenge. To effectively contain costs, solutions must target the drivers of both the level of costs and the growth in costs — and both medical prices and the quantity of services play important roles. Solutions will also need to reduce costs not only for public payers but also for private payers. Two possible solutions that can do this effectively: (1) promote payment rates within specified global targets and (2) the requirement of full transparency of prices to consumers before services are rendered. These are just two possible solutions that are more than capable of not only being implemented but also can successfully control health costs.

Under our current fragmented payment system, providers can shift costs from public payers to private payers and from large insurers to small insurers. Considering a model of self-regulation, public and private payers would negotiate payment rates with providers, and these rates would be mandatory on all payers and providers in a state, while providers could still offer rates below the negotiated rates. The privately negotiated rates would have to adhere to a global spending target for both public and private payers in the state. After a transition, this target should limit growth in health spending per capita to the average growth in wages, which would work against wage stagnation and would be very favorable with the public. According to Uwe E. Reinhardt, the federal government should award grants to states to promote a self-regulation model. States could phase in this model, one sector at a time (i.e. hospitals). In order to receive such grants, states would need to publicly report measures of quality, access, and cost and would...